“I have sent in our federal income tax and our gift tax returns for 2013,” Rumsfeld wrote. “As in prior years, it is important for you to know that I have absolutely no idea whether our tax returns and our tax payments are accurate.”

In his letter, Rumsfeld attributed his ignorance of whether he paid his taxes

“The tax code is so complex and the forms are so complicated, that I know I cannot have any confidence that I know what is being requested and therefore I cannot and do not know, and I suspect a great many Americans cannot know, whether or not their tax returns are accurate,” Rumsfeld wrote.

Rumsfeld noted that he was confused about his taxes even though he “spent more money than I wanted to spend to hire an accounting firm.”

“I do not know whether or not my tax returns are accurate, which is a sad commentary on governance in our nation’s capital,” Rumsfeld wrote.

Comments (280)

I refuse to read the article about that war criminal’s complaints. But given his political bent I would expect that his solution to the tax code complexity is a flat tax – which would do nothing about the complexity but would greatly reduce the rate he and his rich breathren pay on the few classes of income (i.e. wages – the income of the proles) that still are subject to the normal tax rates.

A flat tax would probably be more complex for a solid majority of people since it would be taxing things that were previously exempt (i.e. health insurance, some government benefits) and that are not as straightforward to calculate as income.

This is the lie that Flat Taxers tell. Flat Taxes that are revenue neutral AND income neutral require rates that are so incredibly exorbitant that no one with a brain would support it.

So they lie – either the Flat Tax isn’t revenue neutral and in fact cuts revenue by A TON (most of which would have to come out of the military and Medicaid budgets because that’s where the money is, and so are politically dead before they start) or change the definition of income to include a lot of things that are currently considered exempt.

Are you so inclined as to think that if a flat tax were instituted, the hunky Donny Rumsfeld would pay his taxes without complaint, or would the evil Hague-avoiding bastard still lobby for exemptions that, shockingly, only apply to those having several corporate boardships and receive their salaries in non-wage fashion?

There are many proposed flat taxes, and often the implication is that there would be cuts in “loopholes”, etc. But that’s not a requirement of a “Flat Tax” – all “Flat Tax” means a single rate, no brackets.

In other words, this is just another propaganda trick from the right wing. Use the term “Flat Tax” to be a synonym for “Simplified Tax”, and get people to think that a single tax rate is necessary for simplification when in fact they have no relation.

Obviously “annon” is among the brain dead right wingers who fell for that one.

The fundamental war crime is to start a war without justification. Read the Geneva Conventions as well as the judgments at Nuremberg.

“Obviously “annon” is among the brain dead right wingers who fell for that one.”

I flat tax would simply the code, but it’s not the only way to simply the code. Indeed, the “complexity” that people complain about is for special treatment of certain income. A “flat tax” would, presumably, treat all income the same, while at the same time setting a tax rate that applies to all levels of income.

Of course, you could simplify the code by treating all income the same, i.e. not exempt and non-deductible, and having regressive or progressive tax rates as well.

In either case, treating all income the same is still a form of simplification.

A “flat tax” would, presumably, treat all income the same, while at the same time setting a tax rate that applies to all levels of income

Nice presumption. But certainly not a requirement of a “Flat Tax” per se. Indeed, most advocates also advocate zero inheritance tax, dividend tax, capital gains tax, etc., so this is not a commonly held view.

I flat tax would simply the code, but it’s not the only way to simply the code.

Yes, taking out brackets would do that, but the effort to look up income in the table to get tax is a tiny, tiny, tiny percentage of the overall complexity. And keep in mind that the 1040 collects Social Security and Medicare taxes as well (this is what allows reich wingers to tell the 47%-pay-no-taxes lie), with different starting and stopping points, so unless you reform those to be flat with no ceilings as well you’ll still have those brackets.

“…and also a sad commentary on a rich fucker who apparently doesn’t have a staff of CPAs preparing his taxes.”

Oh, you know he does, as well as an actual tax lawyer on retainer. And a whole host of trusts and other ‘vehicles’ to park and move money. And probably a bunch of offshore accounts, and money which gets moved through something which he can declare as an ‘investment’, turning income into capital gains.

“You either know enough about the tax code to identify ways of simplifying it or you don’t know enough to offer an opinion, yes.”

So if you recognize a problem, but don’t know how to fix it, just shut up? This blog wouldn’t even exist if we followed that advice.

“You don’t just get to shoot off your mouth* because it feels too complicated to you, and neither does Donald Rumsfeld.”

Yeah, Aimai, shut up about your stupid FAFSA problems. No one gives a shit unless you know exactly how to fix the problem. And I didn’t see any solutions in your obviously stupid and whiny post about how complicated taxes can be.

So if you recognize a problem, but don’t know how to fix it, just shut up? This blog wouldn’t even exist if we followed that advice.

But all we have is your bare assertion that you recognize a problem because you’ve conceded you don’t know what you’re talking about. There’s no evidence what you ‘recognize’ is more than a figment of your imagination!

Yeah, Aimai, shut up about your stupid FAFSA problems. No one gives a shit unless you know exactly how to fix the problem. And I didn’t see any solutions in your obviously stupid and whiny post about how complicated taxes can be.

Aimai doesn’t need you to pretend to defend her. This is tacky, bratty, and disrespectful. Behave yourself.

Agreed. That’s why the code won’t be simplified. In fact, it will continued to become more complex. And the only people able to effectively manipulate that complexity will be the rich.

I mean, look at the commentary here. Simplification could have great benefits to the poor and working class, but simplification is automatically bad, because Rumsfeld said something that sounded like he might agree.

Simplification could have great benefits to the poor and working class,

Yeah, there’s no evidence for that and none has been presented in this thread. In fact, most of the anlyses of Flat Tax proposals I’ve seen indicate they will have the effect of being immense giveaways to the rich, balanced on the backs of the poor by either increasing their taxes or decreasing the programs that benefit them.

Do you agree that corporations should be able to deduct special expenses? How about rich people manipulating IRA exemptions? Loopholes that only $600/hr tax lawyers know? Different tax rates for capital gains vs. earned income? How about exemptions for “churches” that are essentially 24-hour infomercials?

“Since they’re the only ones who have to effectively manipulate that complexity, I can live with that.”

Aimai is rich? Just because she’s trying to figure out tax treatment for college loans? Is someone who inherits more than 3,000 rich?

Also, I don’t know if you noticed, but the rich are happy to pay people to avoid paying taxes. They prefer paying a firm 10,000 to save them 10,000,000. 10,000,000 that would otherwise go to public services (or war, whatever).

But you don’t need to simplify the tax code to simplify the process of filing taxes. Just have the IRS figure it out. The government already has most of the relevant information. There are technocratic, non-values-laden ways to simplify the process for most people.

Since the FAFSA is required of many non-rich people, it shouldn’t be as complicated as a millionaire’s tax filing.

It should be as simple as the 1040 with standard deduction, or the 1040 EZ, that most non-rich people file. At most, it should be as complicated as filling out a 1040 with the itemized deductions common to a middle-class family. At least, it should be that simple for people in ordinary economic circumstances.

Also, I don’t know if you noticed, but the rich are happy to pay people to avoid paying taxes.

Yeah, they’re just thrilled about it. That’s why they spend so much money pushing the “tax simplification” propaganda you’ve fallen for so easily.

Remove the active financing exemption. Do the same with mortgage interest deductions and retirement savings deductions. Do the same to all other loopholes, deductions, credits, and exemptions. Eliminate different rates based on sources of income. Eliminate tax subsidies for charities and churches.

In exchange for those actions, reduce rates overall, and increase the minimum earnings required to file or owe taxes. If done properly, you should be able to reduce average tax liability overall (although some will certainly pay more than they do now, but most will pay less), and normalize the amount of taxes derived from each income level in a plainly transparent way.

he’s just a bullshitter. he knows what he doesn’t know isn’t so but the unknown thing is how many more rubes he can sucker into not knowing what he knows. which is to say the tax shelters are east west south and north somewhat of the IRS building

Your new internet is accompanied by an 88834 report “Claiming a communications deduction”. The tubes must be calculated at 15% of I.D. up to 4″, 25% of I.D. up to 8″, and 35% of I.D. up to 12″, unless used by a minor child up to the age of porn in which case O.D. may be used for the calculation.

Oh, come on. Any war criminal worth his salt knows that you launder your blood money through 501(c)(3)s! What can be more charitable—and educational!—than a nice little not-for-profit (cough, cough) war?

There was an AP poll that had 58% of people saying filing tax returns is easy. The only reason Everyone Knows that the tax code is extremely complex is because rich people crow about it so DC policy types listen.

“There was an AP poll that had 58% of people saying filing tax returns is easy. The only reason Everyone Knows that the tax code is extremely complex is because rich people crow about it so DC policy types listen.”

And when you consider the literacy and numeracy of the US population, that’s a very good number.

exactly. I have been filing tax forms since about 1986 and doubt my accumulated time working on my tax forms is 15 hours. I probably have spent more time looking for my W-2 forms than filling out the 1040 form

Well there are a couple of things about me. (a) as I said elsewhere on this thread I am no tax genius and made mistakes ast least twice where the IRS caught them and paid me the tax break I forgot to take, and (b) I am actually a financial person in my day job scary as this may seem given (a), and (c) even being a financial person and usually good at interpreting things like Federal regs for the purposes of my job, I found that the FAFSA is I believe deliberately obscure and confusing.

As opposed to FAFSA, I’ve never found the 1040 particularly hard because I was taught how to fill out a 1040 in high school and never owned a home so mine are never that complex. (and of course I have also made mistakes, prior to using software.) I’ve only been using Turbo Tax for the past 3 years. I like it. You are obviously right, it would be even nicer for me if it were free… but I think it would be an even better solution if the IRS did our taxes for us as happens in other countries.

This from the guy who wrote the following as ways a simplified tax code would help “the poor and working class.”

Remove the active financing exemption. Do the same with mortgage interest deductions and retirement savings deductions. Do the same to all other loopholes, deductions, credits, and exemptions. Eliminate different rates based on sources of income. Eliminate tax subsidies for charities and churches.

Well, we had to fill out FAFSA forms for our kid this year and the questions about income, cars, health care costs and taxes were head splitting. I tried to imagine a family that was not used to filling out such forms trying to wade through it, or a kid who wasn’t receiving enough support from their parents or was a recent immigrant, and I just despaired. Every single thing either made no sense or had to be referred to a schedule somewhere else (put line B here, 2050.1. (c)).

I think you missed the implication of my remark. I wasn’t complaining about it–I was pointing out that it was just as complicated for someone with little money as someone with a large number of assets. Some of the questions are quite ambiguous and you feel obligated to fill them out. Theoretically the child himself/herself is filling it out on behalf of the family. There’s no way a 17 year old from a working class background can fill it out without help. That was really my point.

“I wasn’t complaining about it–I was pointing out that it was just as complicated for someone with little money as someone with a large number of assets.”

I understand. But Joe suggests that complexity doesn’t affect the poor, only the rich. I disagreed, using your valid complaint/description as an example of complexity affecting the poor (or not rich) as well. I don’t know your income level, but I assume you’re not rich if you’re concerning yourself with FAFSA.

“That was really my point.”

That’s really my point to. Simplification can help the poor and working class. Whereas complexity inures only to the benefit of the wealthy, if anyone.

Oh, Theo, no. You assume wrongly. Everyone fills out FAFSA. If you want your child to get a merit scholarship, which is all they can get these days if your income is too high for needs-based scholarships, you have to fill it out. And contrary to your assumption that people who post here and consider themselves on the left are probably not wealthy…well…uh…between us, you’d be wrong.

Really, Theo, you should try to lie a little less often. JfL argued that poor people didn’t have many complications to deal with in filing their taxes, not that poor people are better able to fill out complex forms or whatever you’re trying to pretend others are arguing. Arguing in bad faith the way you do is not going to convince anyone smarter than a bag of hammers, however well the technique may have worked on you.

“fL argued that poor people didn’t have many complications to deal with in filing their taxes.”

Good thing you understand Joe’ real argument. Because I thought he was arguing that rich people are the only ones who have to effectively manipulate the complexity of calculating and filing taxes? I’m sorry for misunderstanding Joe. I only thought that was his argument because he wrote:

“Since they’re the only ones who have to effectively manipulate that complexity, I can live with that.”

I can totally see how you get from “only rich people” to “not many poor people.”

Yes, I use a skill called reading comprehension that you appear to lack. Rich people have more complicated tax returns than non-rich people. For some reason you pretended that JfL’s argument was that poor people never had to deal with complexity, and that aimai’s example of filling out FAFSA forms was relevant to the complexity of the tax code. I don’t necessarily agree with JfL’s actual argument, and I’m not going to try to make it for him, but at least I understand his point was about the complexity in practice of filing taxes for the non-rich, rather than some point about complexity in general not affecting the poor. I’d think any idiot would have understood that, but you proved me wrong.

“FAFSA is still not the tax code Theo, no matter how little you understand the difference.”

It was an example of complexity affecting less than wealthy people. I guess I’m missing the distinction your making. Just because it’s not a tax form itself, doesn’t mean its not an example of complexity affecting people.

Now, Aimai is suggesting that FAFSA doesn’t indicate your relative wealth. I guess if Aimai is rich, then she personally isn’t a good example of complexity affecting the not-rich. I suppose then I would point to her concerns about younger or less wealthy people having to deal with that complexity.

Because nobody was talking about complexity in the abstract, were discussing certain claims of complexity advanced by noted war criminal Donald Rumsfeld and vague assumptions of complexity advanced by yourself.

The general existence of ‘complexity’ as a thing has zero relation to either of these things.

I don’t know what you are talking about, but “we,” Joe, Aimai, and I were talking about whether complexity only affects the rich, or if it also affects the poor. I suppose Joe could argue that, well, FAFSA form complexity is totally different than tax form complexity. He hasn’t made that argument, am its not a good one.

The fact remains that there are many, many instances in which complexity hurts poor people, who are typically less educated and cannot afford to pay people to do things for them. This facts is true whether you are talking about college aid forms, or tax forms.

Aside from my use of Aimai’s story, do you agree or disagree with that?

“Joe was talking specifically about the complexity of the tax system,”

And Joe is wrong. Although I used Aimai’s example of FAFSA complexity to try to explain that to Joe, there has since been several more examples that actually involve poor and not-rich people dealing with complex tax situations. Each of those example further undermine his position, in addition to my attempt to explain to poor Joe why complexity hurts people ill-equipped to deal with complexity.

It’s actually a problem when it comes to keeping lower-income students in college (or getting them in). FAFSA was a huge pain for my middle-class family: mom was in school, divorced from dad, and they weren’t talking. I had to be a go-between–not good times–to get all the numbers.

One of my friends works for a notoriously poor school district and says one of the big hurdles is FAFSA, because the finances of the poor can be very complicated. Say, for instance, grandma is raising you, maybe you’ve had to move a couple times. Getting all that info in one place is a nontrivial task.

I remember having to fill that out; I was a first-generation college student, so of course our family had no institutional memory, so to speak, or any other familiarity with the process. I had to ask my dad a lot of questions, which wasn’t fun at all.

Yes, exactly! My cousin was, until recently, a principal in one of New York’s billion public high schools where tons of her kids were homeless/sleeping on someone’s couch at any one time. For them to get access to, for example, the relevant social security numbers of other lost or missing family members, or any accurate financial data, was a daunting task.

I think the first time I filled out the FAFSA I was almost in tears. It was deliberately confusing. I almost agreed to the PLUS loans before I googled them so I could figure out what the heck they were.

I hate to agree with Theo on anything, and no doubt I will regret doing so, but he has a point about the tax system being problematic for poor people as this NYT article indicates:

For millions of low-income Americans, tax season means the biggest one-time influx of money all year. It also means the annual sprouting of commercial tax preparers: some of them big-name franchises, some mom-and-pops and some, as 20-year-old Brittany Dixon discovered this year, shockingly expensive.

Ms. Dixon, a supermarket cashier and college student, took her tax documents — a W-2 form and some education expenses — to the first place she saw, in a storefront near the interstate. The preparation took about a half-hour, and Ms. Dixon was told the amount of her refund — and that she would be charged nearly $400, about a quarter of the total, in fees.

Continue reading the main story
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Op-Ed Contributor: Rein In Shady Tax PreparersAPRIL 7, 2014
She told the preparer not to file, she said, and found a service willing to do her taxes at no cost. But by then, the first preparer had already filed and taken its cut. “That was my whole car note,” Ms. Dixon said.

At that level of income it can be both complicated (at least in the view of the person filing) and expensive to file taxes. There ought to be a way to simplify it or make the government more responsible for it, especially for people who get the EITC. Because otherwise vulnerable people are being sucked into the quasi fradulent schemes of these fly by night tax preparation people.

I understand it sucks recognizing common ground with the enemy. But I don’t hate you any less for doing it. After all, if we don’t have hate between us, we don’t have anything.

And substantively, I agree. I suppose people here consider any business owner rich, but owning a business, or having any kind of business-like income (from hobbies, rental property, etc.) can quickly complicate taxes.

And even for the poor, it cab be complicated deciding how best to minimize your tax liability by recognizing and claiming with refundable credits, deductions, etc.

I don’t hate you Theo. I said I hate to agree with you. And that is principally because having read your other posts I’m sure to regret it when you begin making the usual awful, incoherent, trollish attacks on other posters or even on the position you held for five seconds when I agreed with you. I’m pretty sure this is the only place we will agree because most of your other opinions are so moronic that we won’t find any other common ground but this one narrow point.

“I’m pretty sure this is the only place we will agree because most of your other opinions are so moronic that we won’t find any other common ground but this one narrow point.”

I agree. This is probably a one-off. In fact, we should probably just forget it ever happened. Let’s just call each other’s positions moronic, awful, incoherent, and trollish. It suits us better, don’t you think?

sounds like rather than changing the tax code to benefit the rich, there might need to be a smidge more oversight of predatory storefront financial operations that target poor people who have little alternative.

I’m not so sure about this, DrS. Because as far as I can see the EITC being in the tax system slightly removes it from the punitive attitude we take towards people who receive money through other branches of the welfare state. Its a lump sum check that comes to people with no strings attached. Other people who have studied this issue may correct me (and I hope they will) but it seems to me that we should increase the EITC and maybe try to give people a bump twice a year, automatically, without the tax preprarers getting involved. Its money that goes straight back into the economy (if its not siphoned off by the creditor class) and its often the only form of lump sum that people can get their hands on or count on.

For poor people getting your hands on a single large sum can be, in and of itself, a big deal since every penny of your basic income is likely spoken for by daily and monthly expenses. Everyone I know who gets the EITC uses it for these big things: kid’s braces, eyeglasses, car payment, debt repayment instead of seeing it spent on tons of little things. I think knowing you had a bump twice a year, that was just going to come to you,might enable people to strategize and schedule some big expenses more successfully without having to go into debt to loan sharks.

Wow, what awful grifters. I think I have said this before in other convos on LGM, my partner who helps homeless senior citizens get housing calls all those kind of businesses (payday loan people, furniture rent a centers, tax preparers, etc) “poverty pimps” and usually they are all right next to each other in a strip mall in a poor area – right across the street from a liquor store.

Ha. You’d be surprised at just how much fun it is doing taxes at a whopping 135% of the poverty level; this year my family needed two adults and about 12 hours to run down the eitc and child tax credits, and that was with online fillable forms.

They’d be easier to figure out if the documentation was written in english (instead of pseudo-HOWTO format) but we computed our taxes from the tax code we’ve got, not the tax code we want. It was a /lot/ easier when I was pulling a quarter million a year.

A part of me has been hoping for years I get audited, because there’s just no way I’ve missed more payments than deductions.

Rich pricks complain about taxation being complex because the sense of entitlement among the wealthy has gotten so huge that they refuse to accept what they know to be fact: that they’re already paying as little as possible, because they can hire people whose entire job is to ensure they do. The more abnormally large your bank account, the harder you find it to believe that you don’t somehow have even more money.

I use turbo tax. I have no idea if the coders have properly coded the over 73000 pages that make up our tax code. but since there have been at least three updates to the software from the time I installed it to the time I filed my taxes, I am guessing there were errors.

I guess I am just in awe of the individuals here who have mastered 73,000 pages of tax code.

I am in awe of the people who make pancakes because clearly they know all about growing, raising and processing the ingredients that go into pancakes, right after they build and install gas lines to their houses and make a stove and griddle.

As someone who has used TT in the past and worked for 14 years as a tax preparer, what it is, is that the software is written before the beginning of the tax season, and there are changes by the IRS after that time that necessitate updates to the program every year.

Even the companies that do tax preparation have to have their programs updated because of changes by Congress/IRS made after it’s written.

If you rely only on the Internal Revenue Code to do your taxes, you’re going to run into trouble. Many of the details are contained in the CFRs, and then there are the cases interpreting both the code and the regulations. So, referring to the tax code as X pages, is simply vague. How many pages do you need to read in order to understand the entire taxation process in this country? It’s far, far more than 72,000.

Now you’re just splitting waffles in order to pretend you have more of an argument than “anything that exceeds a level of complexity that I define is objectively bad” which isn’t an argument, it’s an assertion and a bad one at that.

What was the “It” I referred to? Could the answer lie in the preceding sentence? Maybe. Maybe “it” refers to the number of “pages do you need to read in order to understand the entire taxation process in this country?”

Ask a tax lawyer how many pages they need to read in order to understand their small corner of the tax system. Ask them if its less than 72,000. I’ll listen for the laughter.

They don’t. No individual person does. But reducing complexity is not about individuals filing their own taxes, it’s about reducing loopholes and obscure deductions, credits, and exemptions such that the system produces revenue more efficiently and transparently.

Ideally, that will reduce tax burdens overall. But it should at least reduces government government subsidies for special interests.

because as the zombie showed, that is what you said. You may have meant something else, but what you said was that no individual person needed to understand the entire taxation process and you said that tax preparers did. therefore, a tax preparer can’t be an individual person

Oh? I said, “They don’t. No individual person does,” in response to: “how many people in this country need to understand the entire taxation process, in order to prepare their 1040EZ?”

I took that to mean, if you are preparing a 1040EZ, why do you need to understand the entire tax system?

And then zombie piped in, after already misquoting me once, stating that I said:

“Ask a tax lawyer how many pages they need to read in order to understand their small corner of the tax system. Ask them if its less than 72,000.”

So, what you, hogan, and zombie apparently think is that a tax lawyer must read the same number of pages “n order to prepare their 1040EZ,” as they do to “understand their small corner of the tax system.”

I don’t believe that, so that’s why those were different threads, and I talking about different things. You see how different words mean different things in different contexts?

There are several reasons for the complexity. One of them is to bury loopholes, etc. But taxes are also complex because life/businesses are complex and ‘income’ is an amorphous concept. A great bit of the complexity also results from the whack-a-mole efforts to combat tax shelters.

Also, too, beware of anything that temporarily broadens the base and lowers rates. The special interests will have no problem reinserting the breaks they want over time, but the rates are now ratcheted down, and raising them is VERY difficult.

Well, since the makers and marketers of TurboTax make money off people thinking their taxes are complex, they portray the whole thing as incomprehensibly convoluted and lobby lawmakers to keep things that way.

Turbo Tax is a decent program – I think this was my 21st year in a row of using it. The vast majority of paid preparers use similar programs in-house. Basically once the info is collected you just type it in – and most of the forms with input data can now be uploaded directly (like W2s and 1099s).

The application’s main weakness has been addressing less common situations, and even that has gotten better over the years. When I started state taxes were a real adventure, now they are almost as automatic as the federal taxes. Now even tax forms that are filled out by fewer than 1000 people (such as for specialize energy-saving credits) are automated by Turbo Tax. I still occasionally find a situation where I need to know more than the program, such as I did this year with a state tax credit, but those situations are increasingly obscure.

However, there are many problems with Intuit, the maker of the program. First, they engage in extensive up-sell tactics, often deceptive, and almost always charging far more than they should for the added services. Second, yes they have a strong interest in keeping the code complex.

And as someone else said, while the many Turbo Tax updates no doubt include some bug fixes, even if the software was perfect they’d have to have updates as tax treatments are revised. Because the laws are often written vaguely, both at federal and state level, the regulators have to figure out what they actually mean and give guidance, including tests and so forth, to try to apply the law consistently across the population. As questions come in from people doing early returns those guidances are often revised and clarified.

I use their professional version and it’s quite good. And I wouldn’t fill out an EZ by hand anymore – too many credits, etc. and too easy to make a mistake.

The easiest way to combat the ‘complexity’ problem for the vast majority of filers would be for IRS to use info from employers and others, prepare the returns for taxpayers and send them out for their signature. Intuit is spending very large sums to defeat these efforts, so they make good software but are horrible public citizens.

You go to April 15 with the tax code you have, not the tax code you wish you had. Besides plenty of people have to prepare complicated taxes every day. What’s the big deal about making a guy do it once a year?

I swear to Yob-Soddoth I thought this was an Onion piece riffing on his infamous unknown knowns patter.

“I do not know whether or not my tax returns are accurate, which is a sad commentary on governance in our nation’s capital,” Rumsfeld wrote.

Well, it’s also just “yeah, that’s why you pay someone else to certify that it’s accurate.” It’s complicated enough that’s it’s not worthwhile for a rich guy to really pore over it when he can pay a professional instead. So what?

Hey, Mr. Rumsfeld: liquidate all your investments and stick it in a savings account that earns 0.3% interest. Take the standard deduction and your taxes will be done in seven minutes. Or shut your wealthy yap.

Would you support the IRS sending you a bill so you know what they think you owe?

I certainly would – that’s actually a better solution to this whole thing anyway, since they actually calculate it themselves to make sure that you or your accountant is doing it right.

The best solution is that the IRS sends you a bill and, if they’re wrong, you file a correction. That’s how most of the civilized world handles income taxes these days. We’re one of the only places in the world that makes the citizens do all of the paperwork for their own taxes – or pay someone to do it for them – and then ALSO puts the work into it to verify that it’s right. It’s completely stupid – most of us could just get the documents that the IRS computes, glance over it and compare to our own records, sign off that it’s right and be done. Most of the amendments that people would have would be charitable donations – so you have a process for amending the bill based on donations to charity (or you just have a process where at the first of the year you submit additional charity information for non-cash donations and such to the IRS).

This isn’t about the complexity of the tax code – this is about the big tax prep companies and tax prep software companies lobbying hard to keep a stupid system in place because it makes them money. A true “both sides” problem, since both Republicans and Democrats benefit from those lobbying efforts.

No, not for the vast majority of filers who use W-2s, 1099s, 1098s, etc. to do their returns.

IRS effectively prepares the returns already. But we have to waste a bunch of time doing them first, then IRS checks them and tells us how we messed up and how to fix them.

And NonyNony is right – Intuit has spent at least $11 million fighting these efforts.

One more thing – IRS knows huge numbers (of the poor especially) fail to claim eligible credits and benefits because taxes are complex, even for the poor – EITC is one example. IRS can and does determine eligibility already, and an automated system would increase the number claiming these credits. So anyone who claims this would hurt the working class is lying.

Yeah I was just reading this the other day. I use Turbo Tax and have used it for the past 3 years or so since I was unable to do them on paper anymore. It is really clear and easy to use and I like the product, but it is true that the IRS checks stuff. I’ve never been formally audited but I have had the IRS catch things that were in my favor, twice, and report them to me so that I would not be surprised that my refund was larger. (None of this has happened since I started using Turbo Tax incidentally – and mostly it happened because I had been outside the country where I was exempt from Federal taxes for several years and was not aware of the Bush era child tax credit.)

Are you confident the people who built your mom’s house did it right? How can you be sure? Did you watch them? Do you understand every aspect of building a home, including electrical, HVAC and plumbing to code? And how can you be sure your doctor didn’t miss anything during your last visit? Maybe you should perform a few diagnostic tests of your own.

Yes, and conversely, to Shakezula’s point, why have a regulation about what needs to go into Sheetrock at all? Surely that makes the building code too long and complicated. Lets all rely on the good intentions of Chinese contractors to make sure that the Sheetrock is ok for the end user.

Why even have any national or international standards for the sizes of screws or the nature of a battery? Surely each consumer should independently research his own needs and negotiate with the provider until they come to a mutually acceptable agreement?

Silly shak. Obviously, the building codes are too complex, because Jenbob is unable to read them all; they are upwards of SEVENTY-ELEVEN THOUSAND PAGES!

I am sure that if we just eliminated building codes, the homeless would benefit by being able to build their own shacks. The rich would benefit by being able to build whatever size and shape of horrible consicuous consumption monstrous shrines to their own egos that they want, and this all wouldn’t be borne by the middle class being ripped off by unscrupulous contractors and the increase in taxes necessary to pay for the increase in emergency services and insurance rates required by this (totally unrelated) surge in building failures.

I’m pretty sure the hardcore libertarians want to get rid of building codes and professional and skilled licensure. Remember how upset some troll got at Not Joe the Not Plumber being called not a plumber because he isn’t licensed?

There’s an old joke about the guy who defends himself against the charges of breaking and entering by citing his alibi: he was robbing a bank at the time. That comes to mind when reading the Washington Post’s report about disputed evidence that Iraq is building nuclear weapons:

“Since then, U.S. officials have acknowledged differing opinions within the U.S. intelligence community about possible uses for the tubes — with some experts contending that a more plausible explanation was that the aluminum was meant to build launch tubes for Iraq’s artillery rockets.”

Launch tubes for artillery rockets? Well, then, no need to worry. After all, those rockets would just be used to kill mosquitos carrying the West Nile virus, right? So it’s perfectly okay if Saddam builds them.

More importantly, citing the uncertainty over the use of the aluminum tubes is beside the point. We don’t demand certainty because we can’t achieve certainty. Given the position of Iraq, given the events of the last decade, there’s no presumption of innocence here. If skeptics can show that these tubes couldn’t be used in the development of nuclear weapons, that’s one thing. But we can’t afford to give Saddam Hussein the benefit of the doubt, to interpret ambiguous evidence in his favor. Ambiguity is not a reasonable argument here.
posted by David Nieporent at 9/19/2002 07:27:00 AM |

Interesting way to argue your point, a retrospective piece from 10 years after the war started.

But hey, the first guy there says:

On the 10th anniversary of the U.S. liberation of Iraq (how ironic “liberation” now sounds), I admit that I was wrong to support that war. In a March 17, 2003 article, “Liberators or Invaders?,” I speculated on how the Iraqi people would respond to American troops landing in their country to topple the tyrannical regime of Saddam Hussein.

That article he references is from, you guessed it, Reason magazine.

Being anti war is, on the evidence, hardly some deep libertarian principle.

I’m going to guess that his biggest problem is the tax treatment of foreign investments, which are very tricky to manage because you’re often dealing with tax codes of multiple countries that interact.

Of course, most of us don’t have foreign investments. But given all the favors Dumsfeld did for multi-national corporations and foreign dictators I’m sure he’s got a terrific array of foreign investments.

I’ve always found zombies to be among some of our more punctilious and thoughtful commenters here. That’s not true for all that kind of thing. Can’t say the same for the trolls. And of course we don’t appear to have any vampires or werewolves.

I recall a certain Army general (was it Taguba?) who tried to warn him that the Iraq war would probably cost more than a few tens of millions of dollars and take longer than six months. Rumsfeld fired his ass. So I’m not surprised Rummy doesn’t trust his accountant who tries to tell him, yes, you do owe taxes, sir.

actually, you’re not too far off the mark. by making disclosure, on the return, that there might be some question regarding the correct tax treatment of an item(s), you may avoid penalties, if it’s later determined that your method was, in fact, wrong. large corps are required to file a disclosure document with their returns, I just don’t happen to remember the form # off the top of my head. with the exception of activities previously identified as tax shelters, there is no such requirement for individuals.

I can understand his doubts if he is using the same accountant that told him there were weapons of mass destruction on Iraq. It is good that he is not acting so certain about everything he is reporting anymore.

We had an enormously complicated return for 2013. I lived in two states, and while in one of them, actually worked in a third. I was there for about thirteen months in 2012-13. The kids lived with me the entire time. My spouse, however, only was able to move out to join us full time for about eight of those months. (We both had term-limited fellowships/grants/clerkships/postdocs — mine was for a year, his/hers was for six months plus the summer.) S/he worked in the state in which we lived, though technically s/he was on his/her permanent employer’s payroll in another state. Then, at the end of the summer, we moved back to our permanent home.

We had a ton of job search and moving costs. We had a ton of unreimbursed job expenses. We had a ton of childcare costs. We had a good bit of medical costs — just enough to be deductible. We paid rent in the temporary city, which was deductible for the spouse (s/he was there for less than a year) but not me. We earned rent on our permanent home. We had the usual potential deductions (state taxes, student loan interest, mortgage interest, etc.).

Anyway, we did our own taxes over the weekend. It took about three hours. The real kicker was that it shouldn’t have taken so long. We had so many deductions that the AMT kicked in and it was a waste of time figuring them all out.

Be careful. The last time I lived in three states in one year–and I wasn’t even married or had kids or anything–the State of California decided that I owed more money than I thought and slapped a lien or something on me. This came to light only during the closing on our first house. They actually looked up and said “everything’s fine unless you are the “evil Aimai” who owes money to California.” I said no, of course, not, since I’d been paying taxes for several years after living there and no one had ever contacted me to let me know that there was any kind of dispute about the amount owed. Oops! I was the evil Aimai and we had to do all kinds of crazy things to get our mortgage to go through with this weird tax thing in my name.

Yeah, we’re still a bit skeptical about the one state that we lived in but (1) I didn’t work in and (2) my spouse worked in but drew his/her paycheck from an out-of-state employer. The only saving grace is that I think we were pretty much off the tax grid during that time. We used a CPA (provided for free by my spouse’s employer) until this year, but he retired and hasn’t been replaced. So we were kind of just winging it. We’ll enjoy this year when (hopefully) we live in the same place all year and have the same employers. Still have a ton of medical costs (it’s amazing how much medical care two early-middle-age adults and three small children need) and child care costs, though.

Two words for everyone who contends that the tax code is not a massive cluster#$@k or that it is only complex for the 1 percenters: depreciation recapture.

I helped a relative a few years ago with a modest depreciation recapture problem on an investment duplex. It is unbelievable. If memory serves, to do it correctly you need to take a derivative because multiple items moved in opposite directions at the same time. (we just estimated and got it to the point that we were within 25 bucks of where it should have been).

Investment duplex! That’s just code for slum lord business owner! Obviously your relative was too rich, or else such complexity would not have affected him! Remember, the liberal formula is: Complexity is fine because it only affects the too rich. Therefore, if complexity affects you, you are too rich.

“Depreciation recapture is the USA Internal Revenue Service (IRS) procedure for collecting income tax on a gain realized by a taxpayer when the taxpayer disposes of an asset that had previously provided an offset to ordinary income for the taxpayer through depreciation”

I took the standard engineering calculus sequence in college, but what.

So if I’m understanding correctly:
Buy a house as an investment property for $500,000 in t=0
House value appreciates to $525,000 in t=1
But we can use the depreciation schedule to knock ordinary income taxes down by $10,000 or something equally arbitrary for t=1.
Sell in t=2 for $525,000, for a profit of $25,000.

The IRS wants some of that $25,000, but more than they otherwise would take as normal capital gains taxes because we had also taken the $10,000 deduction.

Well, of course Rumsfeld, but also the investor class in general who earn a special kind of ‘income’ that they insist be taxed at a low, low rate.

One thing Reagan did that I enthusiastically supported was the part of TRA ’86 that eliminated the preference for capital gains, which eliminated the need for depreciation recapture and a vast amount of complexity in the code which outlines what is and is not a ‘capital gain.’ Only problem is it also meant Romney et al pay the same tax rate on their insignificant wages as on the gains from vast stock holdings, and we can’t have that, now, can we?

It gets way worse! With residential real estate, you depreciate the depreciables (e.g. the structure, the roof, the hot water tanks, etc.) but not the nondepreciables (e.g. the land). So you need a T=0 allocation between the land and the structure.

If you then hold the property for so much time that you need capital improvements (eg. a new roof), you have different depreciation schedules. If you bought the property before 1986, and sold it after 1986, as my relative did, you needed to use separate depreciation methodology (MACRS versus ACRS or vice versa).

So, at the time of sale, the house was fully depreciated, the land wsa not depreciated, but had appreciated in value too, new improvements (roofs, water tanks, windows, etc.) were not yet fully depreciated, and we had to use 2 different schedules.

You then had to allocate the gain between the land, which was treated as a capital gain, and the home (but only after doing a depreciation adjustment to reflect the non-fully depreciated capital improvements) and that aspect of the gain was treated as ordinary income. Oh, and depreciation recapture also triggers some AMT concerns, which is where the differential calculus got involved.

In short, I think investment real estate is the single most complex tax trap that a middle class person can stumble into.

Oh, and we’re only talking about a property that sold for something like $175,000. What a mess!

Depreciation is an “allowed or allowable.” You can take the depreciation that is allowed. If you don’t depreciate, the IRS will “impute” the depreciation that would have been allowable when you sell the property as if you had taken it. This could convert some capital gain into ordinary income.

Also, Say you get 20,000 in rental income in Year 1. You have 7,000 in property taxes on it. You have 3,000 in general maintenance expenses that year. Say you also spend 15,000 on a tear-off roof and new landscaping in Yr 1.

My understanding is that you cannot fully expense the roof. You must depreciate it.

Depreciation, as a practical matter, is required. Even if you don’t do it, the IRS may force the issue in an audit.

I’ve always figured that there has to be a certain income level below which the cost of collecting tax owed and auditing returns for a taxpayer is lower than the revenue gained (setting aside for the moment EITC and similar).

What is that income level? Put another way, what is the marginal cost of collecting for the IRS?

For a while in, I think, the ’80s the IRS had a policy of going after low- and middle-income taxpayers, on the theory that even if the yield was smaller, those people had fewer resources to challenge their audits, so it would net out better than going after lawyered-up rich people.